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your own way ♪ congress has not been able to get this stuff done, not because democrats in congress don't want to go ahead and cooperate, but because i think it's been very hard for speaker boehner and republican leader mcconnell to accept the fact that taxes on the wealthiest americans should go up a little bit as part of an overall deficit reduction package. the offers that i've made to them have been so fair that a lot of democrats are getting mad at me. i mean, i offered to make some significant changes to our entitlement programs in order to reduce the deficit. they say that their biggest priority is making sure that we deal with the deficit in a serious way, but the way they're behaving is that their only priority is making sure that tax breaks for the wealthiest americans are protected. >> fiscal cliff negotiations are now down to the wire with a midnight deadline just hours

away. that's tonight, new year's eve. at stake, the prospect of sweeping tax hikes and across-the-board spending cuts if a deal is not reached. and all indications are it's not looking good. here's the latest. the senate is scheduled to reconvene at 11:00 this morning. any deal today would have to be rushed through both chambers of congress before midnight. as talks in the senate stalled yesterday, minority leader mitch mcconnell reached out to someone he believed could help jump-start the negotiations and perhaps deliver an 11th-hour compromise. that's vice president joe biden. mcconnell and biden reportedly spoke several times by phone throughout the night after talks with harry reid came to a halt. welcome back, everyone, to "morning joe." that's the latest. ed rendell and jeffrey sachs all with us along with sam stein and michael steele in washington. joining us also in washington, senior national correspondent for "bloomberg businessweek," joshua green. and joshua, before we go on to

what led to this doomsday scenario that we're facing right now, which was all set up by lawmakers in washington, talk to me about what businesses are looking for and wall street is looking for. there will be reaction. there's always this discussion about the need for certainty. at best, we're going to get some sort of small deal that puts everything off, which makes this whole deadline make no sense. are businesses going to respond well to that? >> if we get a deal, yes. i mean, wall street all along has been looking to avert the fiscal cliff. and frankly, i don't think ceos and businesses care a whole lot about where income tax rates fall. in fact, you saw a number of ceos come out a few weeks ago and say they were happy for their taxes to rise, so long as washington could get a deal. i think they also expected a deal. and then over the last five days, as the talks seemed to fall apart, you saw the markets fall. i think that turned around last night with word that vice president biden and mitch mcconnell would be negotiating overnight. mid-afternoon yesterday, dow futures were way, way down.

it was going to be an ugly day on the markets, and that turned around and now they're looking positive this morning. so, i think the markets are optimistic about a deal, finally. >> and josh, fair to say most economists believe that if we do go over the cliff, it's fairly calamitous for the economy. >> well, it is calamitous for the economy in the long term. i think in the short term, it gives a real blow to consumer confidence. and we saw after the debt ceiling showdown last year that that can be really damaging to the economy, even if congress does wrap up in the new year and turn around and pass something retroactively. >> okay, so, we have, and we're going to look at how we got here, but we have a lot of people who are coming on the set or coming on the show and just shaking their head with washington. they just can't -- it's like this -- it's stupid! it's completely stupid that we're sitting here talking about a deal that's not going to happen or a deal that could be withered down into something that puts off a deal, that just holds things off, because wasn't the deadline to actually avoid doing just that?

wasn't it? >> sure. >> it all started about a decade ago with the $1.5 trillion bush tax cuts. republicans wanted to make them permanent, but a 2006 bill gave the cuts an expiration date. they were supposed to expire. the cuts were set to end in 2010, just as the country was recovering from the worst economic collapse since the great depression. though many democrats were notsa deal with republicans to extend those cuts for two more years. while his party argued against it, the president maintained the deal was essential to help the struggling middle class. that same year, president obama created the simpson/bowles commission, remember that, to find solutions to the debt. the commission came up with a bipartisan plan to cut $4 trillion in deficit cuts, but the deal never gained enough support to be sent to congress. a year later in 2011, another fight emerged in congress over the treasury department's request to raise the debt limit.

congress battled for months and the economy suffered, resulting in the u.s. losing its aaa credit rating for the first time in history. we were downgraded. what's next? and as part of a last-ditch compromise to avoid default, both sides agreed to $1 trillion in spending cuts and an additional $1.2 trillion in across-the-board cuts that would kick in at the beginning of 2013 unless a bipartisan super committee made up of politicians from both parties could come up with an agreement. that super committee failed, and of course, the country is now facing those self-imposed, massive cuts to defense spending and other programs. fed chair ben bernanke warned that if these cuts went through, and we're looking at a deadline that's 16 hours away, the country risked going over what he called a fiscal cliff. since the president's re-election, he and republicans have traded offers and counteroffers, finding little common ground on tax increases and cuts from entitlements.

president obama and speaker boehner met one on one. nothing happened. the speaker offered plan "b," never got enough support within his own party. here we are all over again. do we have tom coburn? joining us now from capitol hill, republican senator from oklahoma, senator tom coburn. senator, thanks for being with us. >> you're welcome. >> so, why, first of all, does this deadline tonight matter? and i heard you make comments yesterday out on the streets of washington to a reporter that you think we're going to go over the cliff? >> i do. >> okay. >> i do. let me take issue with a couple of things you said. >> okay. >> number one is we haven't cut the first penny yet from the federal government, and it's important people know that. what happened in that agreement is $1 trillion in increased expenditures didn't happen. >> okay. >> all right? and now that we're down to the hard work of actually trimming some of the waste out of the federal government, nobody wants to do that.

and so, we're in trouble because we have a set of elite career politicians that re-elect themselves on the basis of the bounty that comes from the federal modus in washington, and rather than on the best interests of the country. and so, i would tell you that -- i would tell you that one of the reasons that we're having difficulty is the fact that we won't actually talk about the issues that are most important to solving our problems. the other point i would make is that we did not have a downgrade because of the debate over the debt limit. we had a downgrade because of our financial condition and the lack of political will to make hard choices to solve them. >> senator, okay. he's getting his ear piece back in. i will wait. i will wait. you got me again? >> i do. i was getting background in it,

that's why i took it out. >> hate it when that happens. thank you for doing that. can you hear me okay? >> i can. >> okay, so, let me ask you this question, and you've always, you know, made a lot of sense on this show, and i'm not targeting you. this is not meant to be in any way with a certain attitude toward you. it's just about washington in general, because you all are paid. you are paid, correct? >> yeah. >> to take care of this country's wallet, to take care of this country's reputation, to take care of this country's health. why wouldn't you all just stay there and get it done, the whole thing? not something little, not something that kicks the can down the road. you've used that phrase time and time again, saying we can't keep kicking the can down the road. you know, i'm tired of hearing it, but even more so, our country really needs some stability and balance and not temporary solutions. why wouldn't you all, who are paid to do this, stay there until you get it done? >> well, i think -- nobody can argue with that. the problem is, it's what you

have to argue with is the fact that everything's done in a dark room, back room, not in the committee, not on the floor. and the reason we haven't achieved anything is that the process that was intended to work for our country doesn't work anymore because we won't bring bills to the floor. you know, we wouldn't be where we are today if we actually had regular order in the senate where you actually had bills come to the floor that actually went through committees and amendments were offered, you took an up-or-down vote and then did something with them. we have not done that, and that's because we value, our leadership values the political more than they value the country. we've put a premium on protecting members rather than exposing truth and letting the american people see the process. so, i think your criticism -- i don't have any problem with your criticism. i'm up here, i offer amendments. we have not done our job, but the reason we're not doing our job is because most members want

to have it both ways. they don't want to have the criticism of making a tough decision. >> dan seymour. >> good morning, dan. >> good morning. look, i agree with you that many members of congress are to blame here, the process is flawed, but josh talked about the senseible people out there, like the ceos of the big companies and wall street. don't you think they're being a little disingenuous here? they're more than happy to see tax rates raised on the, you know, top 1% or 2%, which disproportionately impacts small business, but what they don't say is they're willing to give up their fight for reducing the corporate tax rate. so, on the one hand, the corporate tax rate is something that to them is sacrosanct and it must come down and that's almost separate from the discussion in which they're more than happy to see everyone else's rates go up. >> well, maybe. most of the guys that i've talk ed to are the ones that are going to feel that personally.

what we ought to do is how do we have the best policy that creates the most capital formation, that stimulates the most growth, that puts the most people to work that ends up creating the most taxes back in the federal treasury? you know, somehow, we've gotten out of that loop and then we want to target it. i was very disappointed to hear the president in terms of his criticism on "meet the press." you know, leadership really matters, and these problems can be solved. what it has to do is -- because you just can't have only your way, and you have to say, you know, the real problem is, we're going to solve these problems because the math is the most powerful thing in the room, not the democrat party, not the republican party, not the president. the math's the most important thing in the room. and so, we're going to go through these burps and spits and starts much like our founders thought we would. they knew it would be hard to do these things. but the reason we're in trouble is we've abandoned a lot of

their principles to begin with. >> yeah. >> so, the math is going to cause us to solve the problem. i've put out $9 trillion worth of savings a summer and a half ago. if we had passed that, we wouldn't be where we are. >> i'd just like everyone to stay and just open it up and get it done, and burps and spits and starts? i'd call this projectile vomiting at this point. let me get josh in and then dr. sachs. josh? >> senator coburn, josh green here from "businessweek." >> hey, josh. >> seems to me the deal that was emerging yesterday was actually a pretty favorable one to republicans because we were talking about raising the income tax threshold to $400,000, $500,000, raising the threshold for the inheritance tax, permanent fixes in exchange for what seemed to be a series of just temporary fixes for democrats, unemployment insurance extension and amt patch. why aren't more republicans jumping at that offer? >> well, first of all, we don't -- what you're seeing is speculation and nobody has confirmed those things. i've been in the rooms and those

aren't hard, fast facts. the other reason that they're not jumping is that delays the actual time at which we actually cut spending by two years. so, we're going -- what we're going to do is go through all this process, we increase the debt by $2.1 trillion over the last 17 months and haven't cut the first penny from the federal government. the american people have got to say what are you guys doing? and now we're going to have a process where we delay another two years on making cuts? remember, just in medicare alone, there's $100 billion a year in fraud and we're going to delay fixing that? it makes no sense. >> dr. sachs. >> senator, i really like your statement that the math is going to be the point in the end, and i'm wondering, is there a way to get this process working again, to get it out of the back room and to get clear numbers in front of the american people? is that the president's

responsibility? is it the senate's? how could that actually be done? >> well, i think, you know, what i would say is the president ought to say what he believes. he says i'd put $1 trillion -- none of us have ever seen the $1 trillion in specific cuts, nobody that i know of. i certainly haven't. i've looked for them. he can actually say what he means and mean what he says. harry reid could actually put bills on the floor that the process would work where we would have amendments and the senate would vote its will. it would go to the house. they'd amend it and send it back. you'd go to conference and then you'd send something to the president, the president could either sign it or not sign it. the fact is, is we don't do anything the way our founders intended us to do it. it's all done behind the doors, not with members of the senate but with staff! >> and meanwhile, we're downgraded, you know, our economy is going to tank again. wall street's going to plummet. i mean, seriously? at some point, i just wonder if you guys just stay there?

i know you say there are different ways that bills can't get passed anymore. what if you couldn't leave? wouldn't you get it done? >> we'll do what i've been doing up here the last five days. >> yeah? >> which is sitting around watching you guys. >> well -- >> because we're not in on the participation. nobody's asked us what we think. >> you know, in obvious -- >> i've got to get michael steele. >> from the debt deal and the downgrade, the dow jones industrial average crashed 19% -- >> yeah, that's going to be fun. >> -- over two weeks of trading days. so, that's the world we could be in. >> yeah, well, let me give you a prediction. we're going to have another downgrade, regardless of what comes out of this deal because we deserve it, because our debt-to-gdp ratio, if you really measure it the way everybody else in the world measures theirs, is about 120%. so, remember, the debt per person in this country is $15,000 per person higher than it is in greece. so, we're not far from that

position, and what we have to have is some realistic leadership that says let's think long term. everybody's going to have to sacrifice. there's not a problem we can't solve if we all work together, and we can do it, but everybody's going to have to have some pain. but let's think about the long term. let's quick thinking about the republican or democrat party. let's start thinking about the country. >> yeah. >> and that's what we're not seeing in leadership. >> michael -- >> everybody wants their own advantage, and so you hear all these sharp words coming out of different politicians about how bad the last guy is. what we ought to say is let's get the process moving. let's put it on the floor. why didn't we put -- you know, we wanted to put simpson/bowles on the floor. >> thank you. >> i want to see that. >> couldn't get it. >> michael, i know you're next. hold on one second, though. tom, senator, if the president showed up on capitol hill and rolled up his sleeves, would that make a difference? >> well, yeah, if you put, you all are putting a camera on it. >> i want to see it. i mean, i think we should open the whole thing up.

>> we need to have transparency in what's going on up here so the american people can make a judgment for their selves, rather than take a press hit or, you know, a six-word sentence and let that be a defining moment. let's let them just observe us. >> michael steele. >> senator, it's good to see you, and a happy new year to you. >> hi, michael. >> despite the noise that we have to deal with out here. you've been one of the more sobering conservative voices, whether it's been on simpson/bowles or what you just laid out on the spending side, which i still think is a huge part of this equation, but i want to bring it to the political for the party right now. so, let's say we go over that cliff at 12:01 tonight, and tomorrow morning the white house and the democratic machine starts the drum beat that republicans have caused this, the republicans, fill in the blank, have created this fiscal mess, now that we're over the cliff. how do we as a party with voices like yours get in front of that

noise to reframe this argument just as you just did. take the parties out of this and focus on the nation's business? >> well, number one is i really don't care what's said tomorrow morning. it's a failure of leadership of great proportions of everybody that's here. and anybody you hear trying to make a gain out of that doesn't really care about the country. they care about themselves and advantaging themselves. that's number one. number two is i don't think going over the cliff, as far as a lesson for us, will be all that harmful. i know it's -- everybody's rattled about it, but the fact is, is we will, in fact, reinstitute some tax cuts. we should not reinstitute or eliminate the spending cuts. this government wastes $300 billion to $600 billion a year that nobody knows, nobody would miss if we actually took it out. so, we ought to have some pain in terms of that. the president just did an executive order raising the

salaries of members of senate starting march 31st, and everybody else in the federal government, whereas right now we work 3.8 weeks less than everybody else in the country and get paid twice as much. so, we should start talking about the real issues that the average american cares about. and the third point i would make is you want to cut the taxes and roll them back? let's cut the spending and pay for it, because that's where i actually disagree with republicans. if you want to give -- if you want to pass the bush tax cut and cut spending to pay for it, we wouldn't be where we are today. >> right. >> and we want to starve the beast? well, guess what, starve the beast doesn't work because republicans want to spend almost as much as democrats do. >> wow, okay. on that pretty fair note, senator tom coburn. thank you very much. >> you're welcome. have a happy new year. >> thanks for the good cheer, senator. >> oh, yeah, we'll have a happy

new year, sitting here watching you watch us. >> yeah, he's annoyed that he's watching us. >> i'm annoyed, too, so we're both. >> corker says everyone should just turn off their tv. >> it's actually very not funny, but i guess it's better to laugh than cry. josh green, thank you as well. >> thank you. coming up "politico's" mike allen joins us with his top headlines. and when we come back, republican congressman tom cole. you're watching "morning joe," brewed by starbucks. ♪ these are... [ male announcer ] marie callender's puts everything you've grown to love about sunday dinner into each of her pot pies. tender white meat chicken and vegetables in a crust made from scratch. marie callender's. it's time to savor.

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♪ this is all a political game. they want to talk about the debt, they want to talk about the deficit. they want to talk about simpson/bowles, they want to talk about this and that. it's not revenue, it's spending, it's not the speaker, it's the

president. it's fantasy land. somebody needs to get in the republican party that can actually make a deal, negotiate with democrats, the president and the vice president and get something done. we do not have to go over the cliff. we can stop this if the republicans are serious about governing this country. >> and welcome to fantasy island. joining us now from washington, we have republican representative from oklahoma, congressman tom cole. congressman, thank you very much for coming back on the show this morning. >> thank you, mika. >> we also have ed rendell still with us, san deanor, dr. hensac in washington as well as michael steele in washington. so we have a great panel to talk to you, congressman, this morning. you were the guy willing to cut a deal, i think at that $250,000 limit. i don't know how ostracized you got from your party on that, but -- >> actually, i'm very popular now. >> are you? you're popular, really? why are you still sitting here?

>> well, honestly, again, i've never changed my mind. i think we've dealt with the revenue question early, which is not the answer to the problem, but it's a step toward it. then we could have moved toward where the real issues are, and that's spending restraint and entitlement reform, and that's what we should have within talking about over the last four weeks. having said that, that's what we'll talk about over the next two months. we'll finish this revenue piece i think in the next few days, hopefully before the 3rd, before this congress ends. and then we're going to move on to dealing with spending and entitlements, because that's the only way you can actually solve the fiscal challenge. >> but you know, i don't believe you. i mean, we're going to move on and deal with spending? i really -- after two years? >> well, there's three big triggering mechanisms in front of us, mika, that i think forces there. the first is sequester excel, which some people don't want to do, at least at some level. the second is the continuing resolution which runs out at the end of march, extending authority and everything. and finally, there's the debt ceiling. so, those three things push you

back towards spending and entitlement reform. >> but this was supposed to push us back. this was supposed to be the dooms day deadline to force you guys to do something. >> you know washington enough to know that deadlines are just alarm clocks. that's the way it's worked for 200-plus years. i do think we'll take care of the revenue issue in relatively short order, but it's really not the problem. there's not enough revenue to do much. it's eight or ten days of government spending. and what we've really got to do, you just can't budget. if the president gets all the revenue he asks for, he simply can't deal with the problem without putting forward real spending cuts and real entitlement reform. >> i don't think the president's going to get all the revenue he's asked for, but i'll tell you this, i know this is sort of how washington works, you know how washington works, things get put off, except we've been downgraded. we've just been through a terrible recession and we're on the cliff of another one if we push this. this was supposed to happen now for a reason. >> well, it should happen. look, the house acted on this in may and they've had legislation sitting in the senate. all the senate had to do -- it didn't have to pass what the

house passed, it just needed to pick the bill up, do what senator coburn suggested earlier, have an open process, amend it and send it back. again, we don't control the senate. that's harry reid. but if you wait until the last minute, you'll have situations like we have now. it didn't have to be this way. we acted months ago. i'm sorry the senate didn't choose to do so and i'm sorry the administration didn't ask them to do so. >> sam stein, go ahead. >> congressman, i just have a question about sort of the long-term strategy for the congressional republicans, because obviously, in 2011, there was a chance, there was a deal possibly out there that included not just cpi, but the raising of the medicare eligibility age. looking back at that, and of course, looking back at two weeks ago where it was again on the table, do you think there were missed opportunities there by leadership in the congressional republican party? >> i don't know if there were missed opportunities, but again, i'm a big believer in solving problems one step at a time, and i think one thing we have learned is this elusive grand bargain isn't likely to happen

between this administration and this congress. it can't seem to think that big and do that big a thing at once. i'm sorry. i wish it could. so, when we have an opportunity to actually nail down the tax rates or get the kind of reforms you're talking about, i personally think you ought to take them. now, they're not going to pass on the floor, you know, with a partisan majority. you have to have bipartisan support. but that's what an agreement is all about. once you have an agreement, you're going to get votes from both sides, you can make things happen. >> okay. do you think you guys ought to just stay there until you have something big? >> yeah, actually -- look, we're here now. this isn't where i plan to spend new year's eve or anybody else, so it's not that people aren't prepared to work, but i go back to senator coburn's point, which i think was excellent and a big lesson. let's go back to regular work. we've passed things until the house. just please pick them up in the senate, deal with them, send them back and, you know, we'll work through the process. these big negotiations behind the scenes haven't worked, they frustrate americans, and honestly, they don't seem to produce a product that gets done in the end. >> congressman tom cole, thank

you very much. hope to see you soon again on the show. >> thank you. >> we'll be right back with "politico's" mike allen and cnbc's eamon javers.

♪ what's happening in washington right now is

pathetic. when you think about what the revolutionary generation did, what the civil war generation did, what the world war ii generation did. we're asking not to bankrupt our children and we've got a shambolic, dysfunctional process. most of the blame still has to go to the republicans. they've had a brain freeze since the election. they have no strategy. you don't know what they want and they haven't decided what they want. >> with us now from washington at 35 past the hour, the chief white house correspondent for "politi "politico," mike allen who's here with "the politico playbook," also, cnbc washington reporter eamon javers. we'll start with mike. mike, you have some reason for optimism with some new headlines from the republicans this morning. what is it? >> well, happy new year's eve, mika, and we do. the story line for today will be will vice president biden swoop on to fantasy island and turn it into reality island? and there was some sign that that's going to happen. republicans are embracing the new involvement of vice president biden as an excuse to do things they haven't been willing to do before.

so, the way "politico" is describing it is vice president biden is playing good cop to harry reid's bad cop. i'm told by republican aides that leader mcconnell and vice president biden talked by phone until midnight. their aides talked until longer. and what republicans are saying, we needed a dance partner, and vice president biden gives us one. so, we're moving through the stages of grief here. i think we're to acceptance, maybe reality will come next. >> eamon, greg sergeant writes this in "the washington post." i'd love for you to respond or add on to it. this isn't a normal negotiation, he says. "in threatening to hold the debt ceiling hostage next year, republicans are not making a conventional negotiating demand in which each side withholds concessions in order to extract more from the other side. republican leaders know they will have to raise the debt ceiling, because as they also know, not doing so will lead to

default and damage the economy. if and when they do agree to do so, that will simply constitute an agreement on their part not to hurt the country, yet they will ask that it be treated as a concession for which they should receive something in return." does that seem to kind of make some sense, eamon? >> yeah, absolutely. and mika, the thing that's fascinating in washington is it's new year's eve and i hear people already talking the way they talk on new year's day, oh, this is a terrible mistake, never doing this again, i'm totally going to change my ways. that's what you'd normally hear tomorrow, not today, but there's a lot of regret in this town about the way this thing unfolded. i think both republicans and democrats are going to feel some blame for this thing. and yeah, a lot of people are looking past today's fight, baking in the cake some kind of deal getting done, likely passing the house of representatives. and then we go on to the debt ceiling fight. and what happens there? well, it's a replay of what we just saw, or it's a replay of 2011. and i think that's the question is can washington learn how to

do these things without this brinksmanship until the last second? the answer is no, despite all the regret and everything that you're hearing this morning. >> brinksmanship. >> people vowing to change their ways. you should believe that as much as you should believe all of your hungover friends tomorrow morning. >> yeah, very hung over. mike, i'm just curious. so, let me just get a piece of paper here. oh, i wish i had a binder. how many women are involved in the intense negotiations, the small, behind closed doors? let's list them. what you got? >> well, probably not enough. and of course, the house -- >> not enough? >> are there any? >> well, the house democratic leader nancy pelosi will sign off on a final deal. >> pelosi, okay. >> you can agree that she's not around this table right now, but if the men are reporting major progress, which senate republicans say they had overnight, i think you'll take that. but to pick up on eamon's point what all this means --

>> so, none. >> -- it really pollutes the first 100 days for president obama. the flip side to what joe said earlier when he was calling in from someplace sunny when he said that none of this made major progress. what this means is there's this huge overhang into next year when president obama outlined yesterday on "meet the press" for david gregory his top five priorities for 2013. this makes it much harder, makes that much harder to do something on guns, to do something on immigration, to do real tax reform, to do infrastructure spending. now he has to deal with all the coming calamities, the new cliffs that are going to set up, even if there is some sort of a deal tonight. >> yeah, and don't forget, guys, we've also got the continuing resolution that expires early next year. that means you'd face the prospect of a government shutdown and you've got this debt ceiling fight, and that means you face the prospect of a default on the national debt. those are very serious things and we're going to be dealing with them over the next couple of months, and people are

feeling very bruised and burned here. i think the tone going into those negotiations is just awful. >> mm-hmm. >> you know, you look -- look, the president's party got an expanded presence in the house this last election. they got an expanded majority in the senate. he won big, one could argue, and he still can't get something done. and i know it takes two to tango, but the reality is, he is the president. and for all the reasons mike said, this is poisoning the environment when there are major challenges for the congress to deal with, and i will be hard-pressed to believe that we're going to get real progress on all these other initiatives he outlined on "meet the press" yesterday, given the toxic environment these guys are going through right now. >> but he can and he alone, mika, can change the toxic environment. he should, when the new congress gets sworn in, he should say let's start again. we've got to start again and we've got to get this done and we've got to do a big deal and we've got to do it in the next two to three weeks. we can't go up against the deadline. if that happened -- >> but --

>> then all the things dan says could fall in line. >> but have you seen anything in his first few years that shows he can deal with congress in that way? >> well, this is a new term and he's got to. he's got to exert leadership to get that agenda through. >> a few things. first, i agree, this hurts the president's legacy, absolutely, but politically i think the republicans lose more, because this just feeds into the perpetual self-destruction. seriously. and we all -- >> mika, could i ask real quick, how do you think it would be different if there were more women? you made that point. >> oh, my god. first of all, i just heard that lately over the weekend, mitch mcconnell has been coming into the fray and has been seen as actually getting into the negotiations. and guess what? his chief negotiator, a woman. it's sharon sauderstorm, his chief of staff has been involved. i'm just telling you, if there were more women involved in these negotiations, we wouldn't have brinksmanship. we just wouldn't. that's what boys do, that's what men do. >> it's testosterone. >> it's stupidity, and it's actually leading to our downfall.

>> you're right. you're right. >> y'all might build us up, but you also break us down because you don't listen. none of you listen. politico's mike allen and cnbc's eamon javers, thank you. >> happy new year. >> i got your name right this time. when we come back, how should investors prepare for the office calf cliff? "business before the bell" with mary thompson next. i'm jennifer hudson.

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♪ live look at times square. happy new year, as we count down to the fiscal cliff here on "morning joe." with us now from the new york stock exchange, we have cnbc's mary thompson. mary, it's good to have you on this morning. first of all, how's wall street? i mean, we're preparing for whatever the reaction might be to whatever the pitiful little

plan that might happen today is. >> you know, right now what we're setting up for is probably a lower open here on wall street. if you look at how the markets reacted over the last five sessions, they've had a five-session losing streak, so it looks like we could be on track for a sixth. what this reflects is the growing expectations, obviously, that a grand bargain on the fiscal cliff won't be reached. now, there still remains some hope here on wall street that maybe a band-aid measure will be reached by day's end. nevertheless, a number of traders told me, they say you know, even if we go over the cliff, they'll probably do a short-term fix at least in the early days of 2013. the problem is is that they don't expect the uncertainty that overshadows how we are going to address the long-term deficit issues here in the u.s. they expect that uncertainty to continue for a while, and that is likely to constrain trading, as we have seen this happen over the past five days or so. one thing we do want to point out, though, despite the concerns about the fiscal cliff and washington's inability to

address it, the markets have had a fairly decent year. the dow is going to close -- if we close where we are right now, up almost 6%. the s&p is up 11.5% and the nasdaq is up just about 13.6%. so, all of this reflects the improvement that we had seen in the economy. of course, the concerns are that those improvements will be hindered if we don't have some action from washington. mika? >> all right, you're also looking at 2012 in review as it pertains to our economy. there were certainly some good things that happened. >> there were, and i think what you have to look at specifically is the housing sector. you know, ever since the bursting of the housing bubble, this has been an area that's struggled, but we have seen continued improvement in the housing sector, most recently on the strong pending home sales numbers for the month of november. and so, that's a bright spot. also, auto sales on track to have their best year since 2007. so, those are two areas you can look at and say, you know what, these were bright spots in 2012.

>> jeffrey sachs, the bright spots, will they all be washed away if we go over the fiscal cliff? >> no, because there is going to be a little deal and we're going to continue to struggle and we're going to continue to have basically slow growth. that's the most likely scenario. >> i rarely agree with jeffrey, but a agree there. we're going to be sitting at this table in a couple months having this exact same discussion. >> whereas had we done the big deal seven weeks following the election, i believe the economy would have exploded. >> mary thompson, would wall street have exploded if we had a big deal? that would have been good news. >> if we had a big deal, that would definitely provide a catalyst for wall street. in large part, remember, the thing about the markets is they don't like uncertainty. >> right. >> once you clear up the uncertainty, there is a clear path, and that, a number of people say, could really send the markets off to the races. the u.s. economy, the fundamentals are there, and that's frustrating business owners, because they think they're in a good position, but what they need is clarity from washington. >> so, basically, washington has completely let us down. >> not just washington.

>> well, who else? >> i think the business community, the leaders of fortune 500 companies have been not entirely straight shooters in this whole debate. >> oh, they've been pretty good with the campaign to fix the debt. you know, myself and mayor bloomberg dshs. >> for everybody's tax rates going up and corporate tax rates going down. >> no, they understand there has to be deduction cuts on the corporate side. >> cnbc's mary thompson, thank you very much. >> men. >> see, mary's making perfect sense and is elegant and dignified, no reason to organize. >> we're not elegant? >> oh, no. >> the hand. >> the hand? what was that? i wish i had that on camera, seriously. they physically -- whatever. coming up, there was one issue that was resolved yesterday in washington, the redskins are in the playoffs, beating the cowboys yesterday to win the nfc east. maybe rg3 can negotiate the fiscal cliff next. we'll be right back with more on "morning joe."

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♪ all right, there were some sports events that happened over the weekend, and -- >> one or two. >> -- i'm going to toss this to michael steele, who loves the redskins, and they made the playoffs, michael. >> absolutely. hail to the redskins. rg3, alfred morris, boy, they knocked it out of the park. and look, the washington guys like biden and mcconnell can learn something from this, you

know? when the quarterback is down, maybe you get a little tailback like alfred morris to come in and help you out, and that's what he did for the skins. awesome game last night. >> all right. ed rendell, i guess we've got rookie quarterbacks matching up next week. who do you think's going to win? >> well, i think rg3, they're at home, i think they're going to win. i think they're going to keep moving on. 70% -- he was at 70% effectiveness yesterday and still did great. >> yeah? and sam stein, defending champion giants, sorry, come up short? >> yeah, that was a little rough, but we won last year. i think the real story here is how badly tony romo continues to choke in the clutch. that's why the redskins won yesterday. tony romo threw a couple interceptions, was terrible. >> oh, okay. yep, yep, definitely, even to me more interesting to look at this than washington. up next, what, if anything, did we learn today? weight watchers online worked for us.

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♪ time now to talk about what we learned today. michael steele, you start. >> well, it's all fiscal cliff and i wish everybody a happy new year. i mean, that's our reality. >> yeah. sam stein. >> i learned that senator coburn just sits around and watches msnbc all day. >> he's not alone, apparently. we've got dan